SVR disappearing to new borrowers

The online mortgage company said the changing face of the former 'default option' for mortgage customers is adding to the confusion in the market as it struggles to return to normality.

Mform said lenders including Abbey, Alliance & Leicester, Halifax, Lloyds TSB's Cheltenham & Gloucester, Royal Bank of Scotland and Yorkshire were currently not advertising standard variable rates to new applicants.

Rates on SVRs currently vary massively with as much as 2.24% separating the best and worst although the firms charging 7.24% such as Chelsea Building Society have yet to respond to the Bank of England rate cut.

The firm said the situation on SVRs becomes even more confusing because around 40% of lenders charge an arrangement fee for SVRs while 88% of lenders charge early redemption fees. The average arrangement fee is £213.80 while redemption charges around £155 are to be expected at those firms which charge.

Francis Ghiloni, marketing and business development director at Mform, said the lowest standard variable rate deals were currently among the better deals on offer with rates as low as five per cent so it is disappointing that new borrowers cannot apply. He explained: "In the past they were the default for borrowers who could not or would not search out better deals and they were attractive purely because of their flexibility which included not charging fees.

"Now there are exit fees and application fees it is even more important that customers assess the true cost of the mortgage. Lenders should be more transparent with their pricing policies and not charge exit fees on SVRs. Instead we are seeing signs of new stealth charges being loaded such as deferred arrangement fees which is a trend we very much oppose"